Tuesday, June 13, 2017

SAUDI SIN TAX: Price of Soft Drinks Increase, Cigarette Doubles

Prices of cigarettes and energy drinks have doubled with the implementation of an excise tax that became effective midnight Saturday in a measure unprecedented in the Kingdom.The excise tax, commonly known as a “sin tax,” is imposed on “unhealthy products” that are likely to cause health problems and eventually increase medical expenses paid by individuals or the government, according to the General Authority of Zakat and Tax (GAZT) official website.
Items that are now taxed include: cigarettes and cigar products, energy drinks and softdrinks. It is unclear if other sugary beverages are included since some shops still sell these at normal prices.

A few days prior to the implementation, some smokers struggled to find boxes of their usual cigarettes. Consumers attempted to stock up on cigarettes at their pre-tax price, while suppliers were trying to keep the products off the shelves until the prices rose.At one of the main supermarkets in Jeddah, a shelf stacker said “There was nothing here yesterday,” pointing at the shelf. “Yesterday, the price was normal. But today, a soft drink can is SR2.25 ($0.60).”Some supermarkets had also kept the newly taxed drinks away from customers so they are sold 50 percent higher in price in the case of soft drinks, and double the price for energy drinks.Consumers will now pay SR12 at one supermarket for a 250ml can of a popular taurine drink, which is priced at SR11.90 at another supermarket. Aside from tags of doubled priced energy drinks, a new sign has been posted on market shelves stating: “Energy drinks harmful to health.” The full warning matches the text on beverage cans. This is part of the new move to curb consumption of sugary and energy drinks in the kingdom.

The tax authority urged producers and suppliers of taxable goods to register for the excise tax, the GAZT official website stated. The taxing body expects to lower consumption by people with limited income of the taxed products after the price hike.
Officials of Saudi General Authority of Zakat and Tax, the entity responsible for collecting VAT and excise tax, have told local media that they expect excise tax revenues of $1.87 billion (SR7bn) in just six months.

A regular smoker and energy-drinks lover from Jeddah said the move would not make her quit.“It’s an extra strain on the pocket, but it’s a habit that I can’t just quit or cut down on,” she said.She bought her last pack of the cigarettes she smokes for SR12 one day before the tax into effect. Now it is SR24.Gulf Cooperation Council (GCC) countries are also set to implement a value-added tax (VAT) of 5 percent on certain goods beginning in 2018.
This is just the beginning of taxation imposed on goods in the Kingdom. Starting 2018, a 5%VAT will be implemented on goods throughout the GCC - Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and UAE.

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